Mine

#!/usr/bin/python
import xml.dom.minidom, re

def remove_whilespace_nodes(node):
    remove_list = []
    for child in node.childNodes:
        if child.nodeType == xml.dom.minidom.Node.TEXT_NODE:
          child.data = child.data.strip()
          if not child.data.strip():
            remove_list.append(child)
        elif child.hasChildNodes():
            remove_whilespace_nodes(child)
    for node in remove_list:
        node.parentNode.removeChild(node)
    return node

doc = remove_whilespace_nodes(xml.dom.minidom.parse("test.xml"))

fd = open("test.xml", "w")
fd.write(re.sub("\n[\s]*([^\n<]*)\n[\s]*</", "\\1</", doc.toprettyxml().replace('<?xml version="1.0" ?>\n', '')))
fd.close()